Flash Sale on FAANG - Non-Buyers Beware

I recently expressed my surprise that professional investors don't put at least a small portion of their portfolios (2-4 percent) into ubiquitous FAANG brands like NFLX and AMZN when there's a large dip in their stock prices (if the companies' fundamentals and dominant positions haven't materially changed).

FB has crashed 20 percent overnight, and the argument to buy on this "dip" is even more compelling than with the other two companies. Here's why:

Yes, revenue and earnings slightly disappointed yesterday... but...

  • revenue still increased 41 percent.

-EPS still increased more than 30 percent.

-FB is increasing expenses to (1) assuage users' privacy concerns, as well as to (2) "make it appear" as if they're shoring up its privacy weaknesses. There is a good chance these elevated expenses will not be permanent, which means there is a good chance FB's margin contraction will not be permanent.

-FB still has one of the world's best brands, with no serious competition on the horizon (you're going to quit FB and then become a member of... what? MySpace?).

FB's Instagram and Stories divisions are wildly popular with young people, which bodes will for future usage and monetization of these units.

And most importantly, FB is now trading at a forward PE of 19 -- basically market average -- while its revenue is growing at more than 3X market average, and its earnings came in at 1.5- 2x market average... meaning that this stock is NOT expensive when you compare its growth to its valuation.

I guess my contention is that FB is a juggernaut, and will likely be one for, at a minimum, the next 5-10 years. So when a stock like this -- tremendous growth and brand name, at a reasonable price -- drops 20 percent in one day, it seems like a great opportunity to dip your toe into the FAANG pool.

 

MichaelScarn, sorry there are no responses yet. Maybe one of these topics can point you in the right direction:

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Or maybe the following pros can chime in... Port Ricky harbpaul ffffml

You're welcome.

I'm an AI bot trained on the most helpful WSO content across 17+ years.
 

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